Britain is fast turning into a Banana Monarchy, wilfully blind to corruption

You may remember that, back in November 2010, it emerged that a “cocky” Prince Andrew appeared to welcome and endorse bribery and corruption — or at least that he abhors those who would seek to get in its way, including anti-corruption regulators and investigative journalists (by the way, we only know this thanks to the efforts of the recently convicted U.S. army private Bradley Manning, WikiLeaks and The Guardian).

In an October 2008 U.S. embassy cable the U.S. ambassador to Kyrgyzstan revealed that, during a 2008 brunch at a hotel in the central Asian republic’s capital, Bishkek, a “rude” Prince Andrew — who for some inexplicable reason is a UK trade representative — attacked the Serious Fraud Office for what he called “idiocy”.

In the cable Ambassador Tatiana Gfoeller wrote: “Rude language à la British … [Andrew] turned to the general issue of promoting British economic interests abroad. He railed at British anticorruption investigators, who had had the ‘idiocy’ of almost scuttling the al-Yamama deal with Saudi Arabia.” The prince, she explained, “was referencing an investigation, subsequently closed, into alleged kickbacks a senior Saudi royal had received in exchange for the multi-year, lucrative BAE Systems contract to provide equipment and training to Saudi security forces”. The dispatch continued:

“His mother’s subjects seated around the table roared their approval. He then went on to ‘these (expletive) journalists, especially from the National [sic] Guardian, who poke their noses everywhere’ and (presumably) make it harder for British businessmen to do business. The crowd practically clapped.”

What I find disturbing is not just the behaviour of the oafish Andrew, it is that many of Britain’s regulators seem to share the Prince’s views. They either welcome corruption and collude with corrupt companies to help them cover up past wrongdoing, or are simply too lazy or frightened to bother tackling high-level fraud and corruption.

This story was published on page five of the current issue of Private Eye (9 August – 22 August 2013):

On August 1st, the FRC announced the dropping of its probe into the failure of BAE Systems’s auditors, the notoriously useless KPMG, to raise the alarm, question, or do anything at all about the massive commissions (= bribes) that its defence industry client was liberally handing to individuals and shell companies to smooth the path to the historic al-Yamama deal. The FRC’s excuse for dropping its three years probe? Apparently it would have meant delving too far back into the past. Of course, it didn’t mention that seven current and former KPMG partners and executives are among the FRC’s board directors and senior staff, including the likes of Peter George and Sir Steve Robson – so no conflict there, obviously.

The background to this is that the FRC launched an “investigation” into KPMG’s role as auditor and adviser to the London-headquartered defence and aviation giant in 2010, after BAE settled corruption probes in the US and UK. The FRC investigation was, perhaps conveniently, focused on audit and advisory work carried out by KPMG between 1997 and 2007. BAE Systems — farcically — settled with the UK’s Serious Fraud Office by admitting to a minor accounting charge relating to its activities in Tanzania, for which it paid the modest penalty of £30m. Tony Blair’s government was lampooned and lambasted as wilfully blind to corruption seven years ago after it successfully persuaded the SFO to drop its investigation into the al-Yamama deal on the grounds of “national security”. As part of a settlement between BAE and the U.S. Department of Justice in 2010, the arms manufacturer was forced to pay a criminal fine of $400m (£263m) and plead guilty to a charge of conspiring to make false statements to the U.S. government. Yes there are signs that regulators and other authorities at least try and do their job in the United States. KPMG has denied misconduct throughout and has welcomed the FRC’s decision to drop the investigation.

The FRC has form when it comes to letting ‘Big Four’ accountancy firms — Deloitte, Ernst & Young, KPMG and PWC — off the hook. On April 11th, The Times’s Alex Spence revealed that the Financial Reporting Council had decided against probing ‘Big Four’ firms’ pre-crash audits of UK banks, simply because it wanted an easy life.

“There was a lack of will,” one well-placed insider told The Times. “There was a general reluctance to get into it. It would just be too disruptive, too damaging.”

The FRC has yet to make clear whether it is going to bother to launch a specific probe of KPMG’s role as auditor of the disastrous UK bank HBOS in 2001-08. It is apparently sitting on its hands while it waits to see the outcome of the FSA’s whitewash report into the Edinburgh-based bank’s failure. On a related matter, there is continued pressure for John Griffith-Jones, chairman of the Financial Conduct Authority — who was senior partner at KPMG during its time as HBOS’s auditor — to stand down from his FCA role, as a result of the clear conflict of interest arising from his perceived complicity in audits that lacked professional rigour and which are widely seen as having exacerbated the irresponsibility, recklessness and malpractice that fuelled the banking crisis which in turn has crippled the British economy. Pirc, the corporate governance watchdog, and HBOS whistleblower Paul Moore, himself a former KPMG partner, are among the many powerful voices who are calling for Griffith-Jones’s head.

Interested to note that Jeremy Outen, who served a forensic accountant with KPMG for 21 years, unexpectedly quit his role as director-designate of the National Crime Agency (NCA), yesterday. That means KPMG alumni are running the FCA and HMRC (only!!)